• Retail sales advanced by 1.9% in September, well above market expectations for 0.7%.
  • The biggest monthly gains were posted by clothing & accessory stores (+11.0%), sporting goods, hobby, book & music stores (+5.7%), and motor vehicle and parts dealers (+3.6%). Furnishing, appliances and electronics stores were the only major category in the red (-0.3%).
  • Sales in the control group (excluding auto dealers, building-materials and gas stations) increased by 1.4%, a strong gain that reverses the previous month’s loss of 0.3%.

Key Implications

  • Retail sales continued to increase for the fifth month in the row, reaching a record-high level. September was the period of back-to-school shopping, but also the second month since the $600/week unemployment support was replaced with half-as-generous wage payments coming from the Disaster Relief Fund. Today’s reading came well above market expectations, suggesting that the savings that households accumulated earlier in the year can continue to fund gains in spending even as income growth slows.
  • Despite the impressive progress in the aggregate, some distinct shifts in the retail industry leave room for concern. Spending at restaurants is still 15% below its February reading, while sales in categories like clothing & accessory stores, office suppliers, stationery & gift retailers, and gas stations, are still below their pre-pandemic levels, reflecting the change in preference in favor of online shopping and decline in driving.
  • This strong report is overshadowed by recent developments. Stimulus negotiations appear to have come to a deadlock, the risk of a third wave of COVID is rising, while the rise in weekly jobless claims suggests a further deceleration in job growth in the months ahead.


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